Record Year for Berlin Office Space Market

5 Jan, 2012, Frankfurt

• Lease volumes at 685.000 m² for previous year
• Lease-strong sectors could turn Berlin into a second 'Silicon Valley'
• Vacancies fall
• Top rents at 21,50 €

The Berlin office space market can look back on a record year. Over the past twelve months, some 685,000 m² of office space was newly rented out. And so it was that the market reached an unprecedented milestone for the capital. The figure for the previous year (505,000 m²), which was already good, was able to climb by nearly 36%. According to figures from Cushman & Wakefield (C&W), the latest rental turnover stands at an impressive 55% above the average for the last ten years (the average being 442,000 m²).

The international property consultants report that leasing has increased considerably across nearly all economic sectors and institutions. This applied both to the sectors that are traditionally significant players in the Berlin market and also the sectors that have up until now only rarely been the focus of market analyses.
One of the strongest tenant groups in 2011 was the public sector. The volume of space leased by this sector increased by 15% and its market share stood at around 13% in 2011. Stronger still was the rise in the volume of space leased by companies from the IT sector; with growth of 24.5%, this sector chipped in some 11% of the total annual result. This is followed by lease volumes of 62,000 m² and 56,000 m² rented by consultancy firms (+138 %) and the headquarters of industrial enterprises respectively. The latter sector weren't able to replicate the excellent results of the previous year, because of the large leases of 2010, involving Bosch Siemens, Total and telecommunications firms.

"Of all these positive reports, it's the figures of the IT sector and commercial enterprises that stand out," enthuses Lisa Ebert, of the Berlin Office Rental department of C&W. "According to the latest media reports, companies can be found in these sectors that could turn Berlin into a second Silicon Valley. It is companies that specialise in the development of new information and communication technologies, and also with creative minds, that are breaking new ground in the high-growth e- and m- commerce industries. The distinctions between them are often blurred - between companies and within individual companies. They are, in any event, a strong cluster, which attracted attention in 2011 due to strong leasing activity. Thus, Amazon (c. 8,000 m²), Groupon (c. 8,100 m²) and Zalando (in total c. 6,000 m²) have a market share - as yet unreached by the commercial enterprises - of 8% (53,000 m² in total). It's a similar story in the IT sector. Small-scale leases in particular allowed the figure for this sector to climb to nearly 75,000 m². Of these, there were numerous start-ups, market entrants in the German market, and expansions - in both sectors. This sends a strong signal about the attraction of Berlin as a location. These companies value the benefits of being located in Berlin. In addition to the synergies, particular benefits are the highly-skilled workforce, relatively cheap office and flat rents when compared both nationally and internationally, the infrastructure, and let's not forget Berlin's unique flair, which, in terms of culture, is without equal."

For the fourth quarter in succession, the vacancy rate in Berlin has fallen. This is currently registered at 7.8%. With a current total stock of space of 17.45 million m², there were 1.36 million m² available for short-term lease at the end of December. "The trend of hardly any developers engaging in speculative projects whilst net absorption is positive is set to continue", wagers Lisa Ebert. "With this in mind, we're assuming that vacancy volumes for 2012 will continue to fall quarter on quarter. This will apply in particular to the centre and east of the city."
In the past year, 135,000 m² of office space was created. The volume of space under construction is currently recorded at 284,000 m².

The highest rate of rent stood at € 21.50 per m² at the end of December 2011. This has, therefore, increased by 0.50 EUR per square metre per month over the fourth quarter and continues to be charged in the sub-market 'Centre-1A'. "We are able to detect softly rising rent levels throughout the entire market, whilst incentive packages continue to lose their significance," stresses Lisa Ebert. She goes on: "This applies especially to the favoured central Berlin locations. We anticipate this trend continuing in the coming year. At this point in time, however, we don't consider a repetition of this year's rental turnover as likely. Instead, we are reckoning on the volume of space leased in 2012 levelling off at around 500,000 m². And last but not least, the vibe amongst market participants at year end remains positive, despite the altogether gloomy prognoses for the coming year."

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